Exxon’s $2.7 Million Pegasus Pipeline Fine Second Highest In Five Years

A letter posted detailed U.S. regulators’ finding that Exxon Mobil Corp. should pay a $2.7 million fine for alleged safety violations on its 850-mile Pegasus pipeline that poured some 19,000 barrels of oil in Mayflower, Ark., in March. The proposed fine, first posted in a notice on Nov. 6, is the second-highest fine issued by the U.S. Department of Transportation’s Pipeline and Hazardous Materials Safety Administration (PHMSA) in five years. It appears the fine was triggered by Exxon’s alleged violation of nine regulations.

The letter outlines the inspections that took place along the pipeline, which extends from Illinois to Texas. The regulators note that safety inspections weren’t prioritized properly, and weren’t done often enough. The regulators said in the letter that the risks for pipe failure weren’t properly outlined by Exxon. The regulators wrote in the letter:

The integrity assessment schedule established by the operator did not include consideration of certain manufacturing information in their determination of risk factors as required. The operator did not present an acceptable engineering analysis to PHMSA to demonstrate that the pre-1970 [electric-resistance welded] pipe in the Pegasus pipeline was not susceptible to seam failure.

The regulators are authorized to issue fines of up to $200,000 per day, up to a maximum of $2 million for each infraction. The current record holder in the last five years is Enbridge Energy Partners LP, which was slapped with a $3.7 million potential fine in September 2012, according to PHMSA records. In all, Exxon was assessed some $2.7 million in fines, including two for $737,000. Exxon will have an opportunity to contest the fine. The company shut down the pipeline until safety measures are taken.

A proposed class actionlawsuit was filed against Exxon in Arkansas federal court in April. It was alleged that Exxon had caused significant environmental and economic damage as a result of the Pegasus oil spill. The pipeline, which originates in Patoka, Ill., runs about 850 miles through Missouri and Arkansas, terminating in Nederland, Texas, on the Gulf Coast. It was originally built to carry oil from Texas to Illinois, but its direction was reversed in 2006 to carry Canadian oil and tar sands south, maximizing profits but placing stress on the already unsafe pipeline from both the direction switch and the added corrosion from the abrasive tar sands.

This stress was increased by the company reactivating several pump stations along the route in 2009, increasing capacity by about 50 percent, and the company chose not to adequately inspect or maintain the line to keep up with these added stresses, the complaint alleges. The March rupture, which resulted in more than 19,000 barrels spilling into the area around Mayflower, was the worst oil spill in the state’s history.